Asia Pacific equities fall ahead of US earnings

Key benchmarks:

Tokyo’s Nikkei 225: -0.5 per cent

Hong Kong’s Hang Seng Index: -0.3 per cent

Sydney’s S&P/ASX 200: -0.2 per cent

The broad losses signal little more than profit-taking just before the US earnings season kicks off later on Tuesday when Alcoa posts results, some analysts said.

“The overnight risk sentiment was subdued as the equity markets seemed to take a breather after rising for three consecutive days last week,” said Daniel Lee at Credit Agricole.

The S&P 500 fell 0.4 per cent from a record high reached before the Independence Day holiday, while the Vix measure of volatility jumped. That set a negative tone for Asia and there’s been no market-shaking news to alter the sentiment.

News from the region has been scarce. In Japan, data showed the nation’s current account surplus, a wide measure of trade, widened to a four month high of Y522.8bn in May.

The data included details of Japanese investor buying habits and confirmed that they continue to pile into Australian assets.

Japanese investors bought $A3.3bn of Aussie assets in May, the strongest month of buying in two years, according to Geoff Kendrick, strategist at Morgan Stanley.

“In all Japanese investors have now re-bought A$14.3bn in the eight months to May, having sold A$34.2bn in the 11 months to September 2013,” he said.

Low volatility in global markets has boosted appetite for higher-yielding bonds in Australia, which boast triple-A credit ratings.

The Aussie dollar is up 0.2 per cent to $0.9388 on Tuesday, a third gain after a stark 1 per cent fall on Thursday, when the US dollar surged following a solid monthly jobs report.

The Reserve Bank of Australia would prefer to a see a lower exchange rate but many analysts don’t see the central bank taking any real action to push it lower.

Mr Kendrick predicts the Aussie currency will reach $0.98 this quarter and touch parity with the US currency by year-end.